Superannuation provides for many benefits for all of us through our working lives not least of which is the provision of death and disability insurance. Large superannuation funds by reason of their size alone can buy insurance policies for their members and obtain benefits at a much cheaper rate than individual customers. It is important however to differentiate between a policy which provides a real benefit to members and a ‘junk’ policy which provides the benefit on paper only.

TPD – most common insurance type

The most common insurance type is total and permanent disablement insurance (TPD). Every super fund will have their own policy of insurance and they are all subtly difference. A small difference in definitions however can make a big difference when it comes time to claim for TPD. TPD is most commonly concerned with capacity for work after an injury or illness. Most people would think if you are unable to return to employment you have done before you will be covered. This can however turn on how the likelihood of a return to work is to be assessed by a particular policy.

In some policies the word ‘unlikely’ is used whereas in others the word ‘unable’ is used. While to most super fund members the words ‘unlikely’ and ‘unable’ are interchangeable; to an insurer they bear very different meanings. Traditionally the term unlikely meant that the probability of a return to work was less than 50%. In late 2016 the NSW Court of Appeal interpreted the term ‘unlikely’ to mean that the probability of not returning to work must be such that it excludes all but a remote or speculative chance of being able to return to work. This is a much higher bar for a claimant to satisfy. Even if the chances are less than 50% this no longer means that an injured or ill member will satisfy the definition of TPD.

The term ‘unable’ has been considered by the courts on many occasions and in all circumstances the courts have held the term to require an even more stringent test for the claimant to meet. The reality is that if your policy of insurance contains the term ‘unable’ you must prove that you have an ‘inability’ to ever work again. Such a high bar can exclude all but the most catastrophic of injuries from being successful.

The way in which a claim is prepared and submitted must change depending on the definition in question. These tricky terms mean that a member claiming for TPD benefits is well advised to seek legal representation to ensure the best possible chance of a successful claim.